Supreme Court Addresses What Is A “Tangible Object” Under the Sarbanes-Oxley Act

Today, in a narrow 5 to 4 decision, the United States Supreme Court reversed the opinion of the Eleventh Circuit Court of Appeals which had affirmed the felony conviction of John Yates, a commercial fisherman, who was suspected of having caught undersized red grouper in federal waters off the coast of Florida and convicted for concealing evidence of a violation of the federal conservation laws. This is an important ruling affecting the enforcement of the federal conservation laws and interpreting the scope of the Sarbanes-Oxley Act of 2002, which was enacted in the wake of the Enron collapse and the destruction of financial documents that abetted its demise. The case is Yates v. United States, decided February 25, 2014.
The red grouper is a federally protected species, and the rules–50 C.F.R. Section 622.37(d)(2)(ii) (effective April 2, 2007)–specify that undersized red grouper cannot be caught. A routine inspection of Yates’ vessel, the Miss Katie, disclosed evidence of undersized fish being caught, but this evidence was not present on the vessel when it returned to port–members of the crew stated that Yates ordered them to throw the offending fish overboard. Yates was charged with violating two federal statutes, including Section 1519 of the Sarbanes-Oxley Act, which makes it a felony to conceal or destroy evidence of a “tangible object” with the intent of impeding a federal investigation of any sort. A conviction under Section 1519 is subject to a 20 year sentence and the lasting record of a federal felony conviction.

At trial, Yates argued that a “tangible object” cannot be interpreted to include an object that cannot be used to record or preserve information that can be shredded to hide evidence of financial wrong-doing.. This defense was rejected by the trial court and the court of appeals.

Writing for the plurality (Justice Alito concurred with the result), Justice Ginsburg used traditional tools of statutory construction to reach a result agreeing with Yates that Congress “did not intend ‘tangible object’ in Section 1519 to sweep within its reach physical objects of every kind, including things no one would describe as records, documents or devices closely associated with them”.

Writing for the dissenting justices, Justice Kagan filed a vigorous dissent. As to whether a fish can be a “tangible object”, Justice Kagan references the work of Dr. Seuss, in particular, “One Fish Two Fish Red Fish Blue Fish” More seriously Justice Kagan argues that what really aggravates the majority is its distaste for the “over criminalization and excessive punishment in the U. S. Code”. However, the court cannot rewrite the law: “We are not entitled to replace the statute Congress enacted with an alternative of our own design”.